COLUMN: Proposed bylaw change baffles owner

Q. We live in an association that was formed before a law change in October 1999 to relieve NRS 116. Since April 2001, our management company has tried to amend our covenants and bylaws by mail ballot, as directed by law. Since the amendments are not yet in effect, shouldn't the current bylaws be used?

We haven't had a membership meeting in a year and no board elections since 1999. The developer is the president of the board and two of his family members are also on the board. He is changing the number of board members from 10 to three or five members for our community, which has sold 216 of its 300 homes.

The developer has directed a law firm to rewrite our bylaws and covenants for more than $9,000, which is most of our budget. I am afraid that the developer will spend all of the money that has been collected over the past couple of years and then he will leave.

What do you think about this situation?

A. There appears to be some confusion. First of all, effective Oct. 1, 1999, NRS 116 applies to all Nevada homeowner associations regardless of when they were created and regardless of the amount of their monthly assessments. Exceptions include landscape associations and pre-1992 associations with 12 units or less.

From your comments, it appears that the developer is attempting to update the governing documents to meet the October 1999 changes.

Your association should be governed according to its current documents until the amendments pass. Assuming the governing documents require the association to abide by NRS 116, your association should have an annual meeting and the board should meet at least once each quarter.

As for the board, membership composition is based upon the number of units sold. The developer and his appointments can be board members. Sixty days after conveyance of 25 percent of the units, at least one member needs to be a unit owner, and the developer cannot vote on this election. Once 75 percent of units are conveyed, the entire board should be controlled by the homeowners. Currently, no law prevents a developer from appointing his relatives or nonowners to the board.

The developer needs homeowner approval to change the number of board members. It is normal to have a three- or five-member board for a 300-unit community. In reality, there aren't that many homeowners wanting to volunteer to serve or to complete their term.

You should ask your management company in writing the following questions: When does the board hold its quarterly meetings and why have the owners not been notified, as required by state law? When is the next annual meeting? How many units have been sold and is it time to elect homeowners to the board, and if so, how many?

The management company can also answer finance questions. Request copies of the community's financial statements, the income/expense statement for 2000, and the income/expense statement for the first half of 2001. In addition, ask how much money is in the operating budget and reserve account.

You said the developer, as president, directed a lawyer to amend the documents for $9,000, which sounds quite high. Many attorneys charge between $2,500 to $5,000 to prepare governing documents in the first place.

If this is only amendments to the covenants, it is probably an association expense. If this is a complete rewrite of the governing documents that the developer wants to implement, then the developer should be responsible. In any case, as a homeowner, you have the right to question the expenditure and to obtain copies of the bills to review the actual work completed.

Questions for Barbara Holland may be sent to Association Q. & A., P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759.

Barbara Holland, Certified Property Manager, is president and co-owner of H&L Realty and Management Co. She is a member of the Institute of Real Estate Management and is the author of two books on the subject. Holland is a past president of the Greater Las Vegas Association of Realtors.

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